Illinois House Speaker Mike Madigan, D-Chicago, has repeatedly claimed that he
opposes regulatory reforms and spending reforms because he says they would
“drive down middle-class wages and the standard of living.” The first problem
with Madigan’s statement is that it is directly refuted by evidence: States that
have enacted similar regulatory and spending reforms, such as Indiana and
Michigan, have since seen stronger jobs growth and better income growth than
Illinois has experienced. Second, and more importantly, Madigan’s stated concern
for the middle class rings hollow given that his own plan would directly reduce
the wages and standard of living for Illinoisans by raising their taxes.
Madigan most clearly summarized his economic policy position in a speech before
the City Club of Chicago in December 2015. In his remarks, Madigan proposed
raising income taxes to pay for increased government spending. After overseeing
terrible jobs growth and massive out-migration from Illinois for decades as
House speaker, the only fix Madigan has come up with is to raise taxes.
Contrary to what Madigan claims, tax hikes are the primary way Illinois
politicians have been driving down wages and the standard of living for
Illinois’ middle class. That’s because the most direct way the government can
reduce the take-home wages and the standard of living of the middle class is to
increase taxes on this group.
When the government takes an additional $1,000 in annual taxes from a family’s
pocketbook – as happened to the median Illinois household after the 2011
income-tax hike – that family’s annual wages and standard of living are reduced
by $1,000 per year. And when property taxes grow more than three times faster
than household income, as they have in Illinois since 1990, this further erodes
the middle class’ standard of living.
And that’s only considering the most direct effects of tax hikes. According to
economic research, tax hikes decrease the economic growth that would otherwise
occur. Specifically, the work of Christina Romer, President Barack Obama’s
former chair of the Council of Economic Advisers, shows that tax hikes have
“strongly significant, highly robust” dampening effects on economic growth
because of the negative effect taxes have on investment.
So Illinois families would be hurt twice by Madigan’s plan:
First, their take-home wages and standard of living would be reduced by the
amount of the tax increase.
Second, Illinoisans would find fewer job
opportunities available in Illinois because of reduced economic growth.
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And here’s Madigan’s proposal: a massive tax hike with no
economic reforms to foster jobs growth or government spending
reforms. Madigan’s plan would reduce the wages and standard of
living for all Illinois taxpayers by cutting their take-home
salaries and reducing economic growth in Illinois. The Madigan
approach wouldn’t even offset that tax pain with regulatory reforms
to improve economic growth, or with the responsible spending plan
Illinoisans need for a brighter future.
Employers and investors have long steered clear of Illinois due
to the state’s precarious finances and mountains of regulatory red
tape. Those job creators would continue to avoid Illinois, and
companies currently in Illinois would have even more reasons to pick
up and move elsewhere. It’s already underway. Illinois’
out-migration is currently at record levels – the Land of Lincoln
loses more than 100,000 residents to other states each year, on net,
leaving Illinois as the only state in the Midwest with a shrinking
Michael Madigan income tax hike
Madigan appears to believe the higher taxes that result in less
economic growth will help raise the standard of living for Illinois’
middle class. And Madigan thinks that lower taxes, which lead to
more economic growth, would reduce the wages and standard of living
for Illinois’ middle class.
Madigan has it exactly backward.
After decades as speaker of the House of Representatives, Madigan
himself described Illinois’ situation:
“Put it all together and Illinois is awash in debt.”
One could add “with terrible jobs growth, a declining standard of
living, and a middle class that is fleeing the state” to get the
full picture of the accumulated effects of decades of Madigan’s
Illinois politicians should realize that every time they raise
taxes, they are reducing the wages and standard of living of
Illinoisans. The 2011 income-tax hike was a direct attack on
Illinois’ middle class. Chicago’s massive property-tax hike and Cook
County’s huge sales-tax hike inflict still more damage on the middle
class in the most populous area of the state. A 2017 income-tax hike
would be the same thing – more economic pain, less take-home pay,
and a lower standard of living for all Illinoisans.
At a minimum, Illinoisans should be able to expect their political
leaders to enact substantial reforms both to contain government
spending and to encourage jobs growth so that residents can look
forward to a better standard of living and a more prosperous future.
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